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Clinton: Devote Surplus To Social Security

Clinton, Reuters President Clinton begins his State of the Union address Tuesday night. (Reuters)

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  • By John Harris
    Washington Post Staff Writer
    Wednesday, January 20, 1999; Page A1

    President Clinton appeared before a joint session of Congress last night to present an ebullient vision of a nation enjoying vast prosperity after six years under his leadership, a newfound abundance that he said should be used to prepare for the burden of a rapidly aging population in the next century.

    At a moment of maximum personal travail, Clinton opened his annual State of the Union address with a boast that "America is working again" before announcing a policy barrage that includes one of the more ambitious initiatives of his presidency: a plan to devote some $2.7 trillion in projected budget surpluses over the next 15 years to Social Security.

    Speaking in personal terms about the obligations of his baby-boom generation, Clinton proposed allowing the 64-year-old retirement program to invest a portion of its money for the first time in the stock market. And he pledged a new program that would spend billions to create individual accounts designed to coax Americans to invest more for their retirement.

    Clinton also proposed directing billions of the surplus to the Medicare health insurance program for seniors. Cumulatively, the president anticipates spending nearly 90 percent of the surplus on programs for the aged.

    In his latest assault on Big Tobacco, Clinton disclosed he is directing the Justice Department to prepare litigation to sue cigarette companies seeking hundreds of billions of dollars in smoking-related costs borne by Medicare and other federal programs.

    Simply by appearing in the House chamber last night, Clinton was making history of a sort he never hoped for becoming the first president to deliver his annual message before a Congress deliberating whether to evict him from office.

    Clinton's response was to make no reference to impeachment in the 77-minute speech. Instead, he struck a relaxed, genial tone. Speaking to a Congress that has been riven for months by the most vituperative brand of partisanship, Clinton opened his address by recalling the admonition of new House Speaker J. Dennis Hastert (R-Ill.) for Republicans and Democrats to work in a spirit of bipartisanship and civility. "Mr. Speaker, let's do exactly that," the president said.

    At a time of doubts about the vitality of his presidency, Clinton tried to silence critics by turning his State of the Union into an extravaganza of policy and theater. Instead of recognizing one or two honored guests in the crowd, he recognized a half-dozen, including baseball star Sammy Sosa and civil-rights heroine Rosa Parks.

    And he peppered the audience with literally dozens of policy ideas big and small on subjects from adult literacy to parks protection, from regulating health maintenance organizations to imposing new teaching and discipline standards on local schools. He called for affordable drugs for senior citizens, and drug-testing for prisoners.

    The response was decidedly mixed. Clinton was interrupted by applause some 100 times, occasionally for bipartisan ovations. But, most of the times, Republicans were coolly polite, staying in their seats silently or clapping perfunctorily.

    Clinton made light of the divergent receptions on the two sides of the aisle on one occasion when Republicans did clap lustily for Clinton's appeal that women be given equal pay for equal work. "That was encouraging, you know?" Clinton joked. "There was more balance on the seesaw. I like that. Let's give them a hand."

    Beyond the humor, advisers said, Clinton was trying to make the most of a strange and contradictory moment appearing as a president high in the polls but fighting to remain in office. He intended to send a message not merely about the state of the union but also about the state of his presidency, serving notice to Congress and a television audience projected to be at least 50 million people that Clinton intends to remain in office for the next two years as the dominant force in Washington's policy debate.

    The recurring theme in last night's speech was an appeal that Americans not simply celebrate prosperity but use it to meet long-term challenges.

    "The promise of our future is limitless," he said. "But we cannot realize that promise if we allow the hum of our prosperity to lull us into complacency. . . . So, with our budget surplus growing, our economy expanding, our confidence rising, now is the moment of this generation to meet our historic responsibility to the 21st century."

    One of the more striking ways Clinton proposed to do this was through a new idea he dubbed "Universal Savings Accounts." Under the administration's plan, which officials yesterday acknowledged was still in the formative stages, each American would receive an identical chunk of money from the government to be invested as seen fit. In addition, the government would match a percentage of any additional money a person chose to invest (the match would be larger for lower- and middle-class earners and gradually fade out the more someone earned).

    The president's speech, and the Republican response that followed, affirmed the widespread expectation that once the impeachment drama comes to a close the capital's policy agenda in 1999 will be dominated by two intertwined subjects. One is the politics of aging, the other the politics of prosperity.

    After nearly two decades during which chronic deficits shadowed nearly all domestic policy discussions, the debate now is what to do with a prosperity-driven surplus that last fiscal year exceeded $70 billion. Starting at last year's State of the Union address, Clinton fended off GOP plans to use the surplus for an across-the-board tax cut with his vow to "Save Social Security First."

    This year, Clinton bowed to GOP demands that he provide some detail as to how he might do this. What he unveiled last night was a classically Clintonesque response to a delicate political problem: He is seeking to defeat the opposition by borrowing part of their agenda, in the hopes this will leave him in a stronger position to oppose other parts. While some conservatives have said the answer to soaring costs for Medicare and Social Security is trimming benefits, Clinton said he is prepared to direct billions more to to preserve entitlements.

    But he has responded to pleas that the only way to save the 64-year-old Social Security system is by doing something that was anathema to an earlier generation of Democrats putting money in the stock market. By investing no more than a quarter of the Social Security trust fund in the markets, Clinton said, the government can achieve higher returns on its money and extend the life of the system from about 2030 to 2055.

    Republicans are arguing that individuals should have direct control over how their Social Security money is invested an idea that Clinton and Democrats have steadfastly resisted. But the so-called USA accounts will allow Clinton to say that he too supports more individual control.

    By the end of his speech, Clinton made clear that his administration has completely divided up a 15-year surplus his administration predicts will total $4.2 trillion.

    Sixty-two percent would go to Social Security, 15 percent to the Medicare program, 15 percent to the USA accounts, and the rest to various spending initiatives, the largest of which is an extra $110 billion over five years for the Pentagon.

    In the GOP response, Reps. Jennifer Dunn (Wash.) and Steve Largent (Okla.) said Social Security could be fixed while still enacting their party's plan for a 10 percent across-the-board cut in income tax rates and eliminating the "marriage penalty" paid by many two-income couples. "Mr. President, give it back," Dunn said of the surplus.

    While the opening passages of Clinton's speech dealt with the problems of caring for the aged, he pivoted into what he said was the other great 21st century challenge how to improve the care and education of young people.

    Promoting a plan that his advisers had laid out earlier this week, Clinton said the federal government needed to start demanding more results in exchange for the $15 billion annually it spends in aid to public schools.

    What he called an "Education Accountability Act" would require that schools end "social promotion" of students who are flagging academically; increase funding for after-school and summer programs; insist that schools adapt tougher discipline policies; promote "performance exams" for teachers; and require local districts to identify failing schools and either improve or shut them down.

    Clinton's announcement that the Justice Department was preparing plans to take the tobacco industry to court comes as the president is also planning to seek a new 55-cent-per-pack tax on cigarettes in his budget.

    Both measures are an attempt to salvage Clinton's failed effort to pass far-reaching tobacco legislation last year. After that measure was blocked by Senate Republicans, the administration began searching for other avenues to reduce teen smoking. One option was higher taxes. Another was a federal lawsuit seeking to recover billions spent to treat smoking-related diseases in the Medicare program and other government health plans for veterans and federal employees.

    Such a lawsuit would follow in the path of risky and ground-breaking lawsuits filed by more than three dozen states, which last year spurred the tobacco industry to agree to a $206 billion settlement.

    On trade, Clinton appealed for a new consensus on what is traditionally among the most divisive issues. "I think trade has divided us and divided Americans outside this chamber for too long," he said. "Somehow, we have to find a common ground on which business and workers and environmentalists and farmers and government can stand together."

    His solution was a call for lower trade barriers but also a vow to get tough on Japan if it does not reverse what the administration suspects is a pattern of dumping steel in this country.

    Clinton called for launching a new round of global negotiations later this year aimed at lowering trade barriers worldwide, especially in agriculture.

    Up to now, the administration has shied from acceding to European and Japanese requests for a new trade round, largely because of fears that it may prove difficult to rally American public opinion behind moves to reduce trade barriers further. To complete a successful round of talks the White House will have to win special trade negotiating authority from Congress something lawmakers have so far refused to give Clinton.

    But the president opted for advancing the free-trade agenda in part to counteract protectionist forces that have gained strength amid the global financial crisis.

    Clinton said strains on troop readiness and weapons modernization required reversing a trend toward declining defense spending that began in 1985. America's military men and women, the president said, "always come through for America; we must come through for them."

    In the most concrete foreign-policy initiative, Clinton called for a two thirds increase in U.S. assistance to Russia, Ukraine and other former Soviet republics to "safeguard nuclear materials and technology so they never fall into the wrong hands." His request would raise spending on nuclear security programs in those countries to $4.2 billion over the next five years, from the $2.5 billion already budgeted.

    Clinton also pledged to combat terrorism, keep Iraq contained and press Serbia to end repression of ethnic Albanians in the Kosovo province. He also called for ratification of the Comprehensive Test Ban Treaty, a long-sought goal. He also reaffirmed his administration's commitment to the United Nations, saying he would again ask Congress for money to pay off this country's $1 billion debt to the organization.

    And he said the federal budget he will unveil next month proposes increases to help U.S. communities prepare against terror attacks on critical infrastructure such as power grids or computer networks, and to support immunizations against biological weapons.

    Among the policy proposals Clinton presented in a rapid-fire style, were a revival of the health care bill of rights that failed last year, and an increase in the minimum wage by a dollar to $6.15 an hour. He won bipartisan applause for a tax credit of up to $250 to help parents who stay home to care for infants. Vice President Gore got several of his policy priorities addressed, including a new "clean-air fund," with aid for localities and tax incentives for clean-energy technologies.

    Clinton also threw a rhetorical bouquet to first lady Hillary Rodham Clinton, who stood for a wide round of applause for her work in preserving historic sites and helping children.

    Chief Justice William H. Rehnquist, who is presiding over the Senate trial deciding whether to remove Clinton from office, did not join his court colleagues at the speech. His aides reportedly questioned whether it was appropriate for him to attend.

    While Clinton did not mention the Senate debate about whether he should remain in office, Republicans did in their response. "Our country is not in crisis. There are no tanks in the streets," Dunn said in the nationally televised GOP response to the president.

    "No matter what the outcome of the president's situation, life in America will go on," Dunn said. "Our lives will continue to be filled with practical matters, not constitutional ones."

    Staff writers Paul Blustein, Thomas W. Lippman and Saundra Torry contributed to this report.

    Copyright 1999 The Washington Post Company

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